10-K 1 d27349_10-k.htm ANNUAL REPORT HTML


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

                 
  (Mark one)              
  [ X ]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: October 3, 2010
 
                 
              OR  
                 
  [     ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
 

Commission File Number:    1-6905       

                 
  RUDDICK CORPORATION  
  (Exact name of registrant as specified in its charter)  
  North Carolina           56-0905940  
  (State or other jurisdiction of
incorporation or organization)
          (I.R.S. Employer
Identification Number)
 

  

                 
  301 S. Tryon St., Suite 1800, Charlotte, North Carolina           28202  
  (Address of principal executive offices)           (Zip Code)  

Registrant's telephone number, including area code: (704) 372-5404

Securities registered pursuant to Section 12(b) of the Act:

                 
  Title of each class:           Name of exchange on which registered:  
  Common Stock           New York Stock Exchange, Inc.  

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o    No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


                       
        Large accelerated filer x     Accelerated filer o        
        Non-accelerated filer o     Smaller reporting company o        
        (Do not check if a smaller reporting company)              

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No x

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant's most recently completed second fiscal quarter, March 28, 2010, was $1,395,057,000. The registrant has no non-voting stock.

As of November 26, 2010, the registrant had outstanding 49,143,473 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III: Portions of the Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Company's 2011 Annual Meeting of Shareholders to be held on February 17, 2011 are incorporated by reference into Part III. (With the exception of those portions which are specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed or incorporated by reference as part of this report.)


RUDDICK CORPORATION
AND CONSOLIDATED SUBSIDIARIES

FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 3, 2010

TABLE OF CONTENTS

                 
  PART I              
              Page  
  Item 1.     Business     1  
  Item 1A.     Risk Factors     3  
  Item 1B.     Unresolved Staff Comments     6  
  Item 2.     Properties     6  
  Item 3.     Legal Proceedings     7  
  Item 4.     [Removed and Reserved]     7  
  Item 4A.     Executive Officers of the Registrant     7  
                 
  PART II              
                 
  Item 5.     Market for Registrant's Common Equity, Related Shareholder        
        Matters and Issuer Purchases of Equity Securities     8  
  Item 6.     Selected Financial Data     10  
  Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations     11  
  Item 7A.     Quantitative and Qualitative Disclosures about Market Risk     23  
  Item 8.     Financial Statements and Supplementary Data     24  
  Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     50  
  Item 9A.     Controls and Procedures     51  
  Item 9B.     Other Information     51  
                 
  PART III              
                 
  Item 10.     Directors, Executive Officers and Corporate Governance     52  
  Item 11.     Executive Compensation     52  
  Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters     52  
  Item 13.     Certain Relationships and Related Transactions, and Director Independence     52  
  Item 14.     Principal Accountant Fees and Services     52  
                 
  PART IV              
                 
  Item 15.     Exhibits and Financial Statement Schedules     53  

PART I

Item 1. Business

Ruddick Corporation (the "Company") is a holding company which, through its wholly-owned subsidiaries, is engaged in two primary businesses: Harris Teeter, Inc. ("Harris Teeter") currently operates a regional chain of supermarkets in eight states primarily in the southeastern and mid-Atlantic United States, including the District of Columbia; and American & Efird, Inc. ("A&E") manufactures and distributes industrial sewing thread, embroidery thread and technical textiles on a global basis.

At the end of fiscal 2010, the Company and its subsidiaries had total consolidated assets of $1,889,886,000 and had approximately 25,200 employees. The principal executive office of the Company is located at 301 S. Tryon Street, Suite 1800, Charlotte, North Carolina, 28202.

Ruddick Corporation, which is incorporated under North Carolina law, was created in 1968 through the consolidation of the predecessor companies of Ruddick Investment Company (which was subsequently merged into Ruddick Operating Company) and A&E. The Company acquired Harris Teeter in 1969. Ruddick Operating Company is not classified as a separate operating component of the Company due to its limited operations and relative size to the consolidated group. Ruddick Operating Company manages venture capital holdings in a limited number of entities and has investments in various independently managed venture capital investment funds. For information regarding the Company's investments, see the caption entitled "Investments" in Note 1 to the Consolidated Financial Statements in Item 8 hereof.

The two primary businesses of the Company, together with financial information and competitive aspects of such businesses, are discussed separately below. For other information regarding industry segments, see Note 13 to the Consolidated Financial Statements in Item 8 hereof.

The only foreign operations conducted by the Company are through A&E. Neither of the two primary businesses would be characterized as seasonal. The following analysis is based upon the Company's operating locations for the fiscal periods and year end (in thousands):

                       
             2010     2009     2008  
  Net Sales for the Fiscal Year:                    
  Domestic United States   $ 4,237,142   $ 3,940,608   $ 3,810,635  
  Foreign Countries     163,308     137,214     181,762  
      $ 4,400,450   $ 4,077,822   $ 3,992,397  
                       
  Net Long-Lived Assets at Fiscal Year End:                    
  Domestic United States   $ 1,088,527   $ 1,088,602   $ 978,363  
  Foreign Countries     32,794     36,238     40,625  
      $ 1,121,321   $ 1,124,840   $ 1,018,988  

The Company's consolidated working capital as of October 3, 2010 consisted of $544,971,000 in current assets and $402,047,000 in current liabilities. Normal operating fluctuations in these balances can result in changes to cash flow from operating activities presented in the statements of consolidated cash flows that are not necessarily indicative of long-term operating trends. There are no unusual industry practices or requirements relating to working capital items in either of the Company's subsidiary operations.

The Company employs fifteen people at its corporate headquarters, including two executive officers who formulate and implement overall corporate objectives and policies. The Company's employees perform functions in a number of areas including finance, accounting, internal audit, risk management, financial reporting, employee benefits and public and shareholder relations. The Company assists its subsidiaries in developing long-range goals, in strengthening management personnel and their operations and financing. Management of each subsidiary is responsible for implementing operating policies and reports directly to management of the Company.

Harris Teeter

As of the end of fiscal 2010, Harris Teeter operated 199 supermarkets located in North Carolina (134), Virginia (35), South Carolina (13), Maryland (5), Tennessee (5), Delaware (3), District of Columbia (2), Florida (1) and Georgia (1). These supermarkets offer a full assortment of groceries, produce, meat and seafood, delicatessen items, bakery items, wines and non-food items such as health and beauty care, general merchandise and floral. In addition, Harris Teeter operated pharmacies

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in 125 of their supermarkets as of the end of fiscal 2010. Retail supermarket operations are supported by two company-owned distribution centers and one company-owned dairy production facility. Other than milk and ice cream produced by the company-owned facility, Harris Teeter purchases most of the products it sells, including its store brand products, from outside suppliers or directly from the manufacturers. Harris Teeter's sales constituted 93% of the Company's consolidated sales in fiscal 2010 (94% in fiscal 2009 and 92% in fiscal 2008).

The supermarket industry is highly competitive. Harris Teeter competes with local, regional and national food chains along with independent merchants. In addition to the more traditional food stores, Harris Teeter also competes with discount retailers (including supercenters that carry a full line of food items), many of which are larger in terms of assets and sales. The consolidation of competitors within the supermarket industry has reduced the number of local food chains and independent merchants. Additionally, some discount supercenter operators, such as Wal-Mart and Target, are continuing to expand and offer more items typically found in supermarket formats. As a result, Harris Teeter is likely to compete with more, larger food chains in its markets. Principal competitive factors include store location, price, service, convenience, cleanliness, product quality and product variety. No one customer or group of related customers has a material effect upon the business of Harris Teeter.

As of the end of fiscal 2010, Harris Teeter employed approximately 9,700 full-time and 12,600 part-time individuals, none of whom were represented by a union. Harris Teeter considers its employee relations to be good.

American & Efird, Inc.

A&E is one of the world's largest global manufacturers and distributors of industrial sewing thread, embroidery thread and technical textiles, produced from natural and synthetic fibers. Manufacturers of apparel, automotive materials, home furnishings, medical supplies and footwear rely on A&E industrial sewing thread to manufacture their products. A&E's primary products are industrial sewing thread, embroidery thread and technical textiles sold through its employed sales representatives, commissioned agents and distributors. Technical textiles represent non-apparel yarns A&E supplies to its customers in the automotive, telecommunications, wire and cable, paper production, and other industries. A&E also distributes sewing supplies manufactured by other companies. A&E sales constituted 7% of the Company's consolidated sales in fiscal 2010 (6% in fiscal 2009 and 8% in fiscal 2008).

A majority of A&E's sales are industrial thread for use in apparel products. The apparel market is made up of many categories servicing both genders and diverse age groups, including jeanswear, underwear, menswear, womenswear, outerwear, intimate apparel, workwear and childrenswear. A&E also manufactures industrial thread for use in a wide variety of non-apparel products including home furnishings, automotive, footwear, upholstered furniture, sporting goods, caps and hats, gloves, leather products, medical products and tea bag strings.

Headquartered in Mt. Holly, North Carolina, A&E operated five modern manufacturing facilities in North Carolina and four distribution centers strategically located in the United States as of the end of fiscal 2010. The manufacturing facilities have been designed for flexibility and efficiency to accommodate changing customer product demands.

A&E also has wholly-owned operations in Canada, China, Costa Rica, El Salvador, England, Honduras, Hong Kong, Italy, Mexico, Malaysia, The Netherlands, Turkey, Poland, South Africa and Slovenia; majority-owned joint ventures in China (two), and the Dominican Republic; minority interest in ventures with ongoing operations in Bangladesh, Brazil, India and Sri Lanka; and a 50% ownership interest in a joint venture in China. A&E's consolidated assets in these foreign operations total approximately $178 million at the end of fiscal 2010. Management expects to continue to expand foreign production and distribution operations, through acquisitions, joint ventures or new start-up operations.

The domestic order backlog, believed to be firm, as of October 3, 2010, was approximately $11,799,000 versus $10,770,000 at the end of the preceding fiscal year. The international order backlog as of the end of fiscal 2010 was approximately $2,192,000 versus $1,984,000 at the end of the preceding fiscal year. The majority of the domestic and international order backlog was filled within five weeks of the fiscal 2010 year end. As of the end of fiscal 2010, A&E had approximately 7,300 domestic and 6,000 international active customer accounts. In fiscal 2010, no single customer accounted for more than 4% of A&E's total net sales, and the ten largest customers accounted for approximately 14% of A&E's total net sales.

A&E purchases cotton from farmers and domestic cotton merchants. There is presently an adequate supply of cotton. Synthetic fibers are bought from the principal American synthetic fiber producers for domestic operations and from the principal Asian and American synthetic fiber producers for operations in China. There is currently an adequate supply of synthetic fiber for A&E's global operations.

A&E has three patents issued. There are no material licenses, franchises or concessions held by A&E. Research and development expenditures were $518,000, $428,000, and $509,000 in fiscal 2010, 2009 and 2008, respectively, none of which were sponsored by customers. Two full-time employees are currently engaged in this activity.

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The industrial sewing thread industry is highly competitive. A&E is one of the world's largest manufacturers of industrial sewing threads and also manufactures and distributes consumer sewing thread, embroidery thread and technical textiles. A&E competes globally with Coats plc, as well as regional producers and merchants in the industrial thread, embroidery thread and technical textile markets. The key competitive factors are quality, service and price.

A&E and its consolidated subsidiaries employed approximately 2,900 individuals worldwide as of the end of fiscal 2010. None of the domestic employees and an insignificant number of employees of foreign operations are represented by a union. A&E considers its employee relations to be good.

Available Information

The Company's Internet address is www.ruddickcorp.com. The Company makes available, free of charge, on or through its website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and beneficial ownership reports on Forms 3, 4, and 5 as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange Commission.

Item 1A. Risk Factors

This report contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as "expects," "anticipates," "believes," "estimates" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could" are intended to identify such forward-looking statements. Readers of this report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report. The statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. We face risks that are inherent in the businesses and the market places in which Harris Teeter and A&E operate. The following discussion sets forth certain risks and uncertainties that we believe could cause actual future results to differ materially from expected results. In addition to the factors discussed below, other factors that might cause our future financial performance to vary from that described in our forward-looking statements include: (i) changes in federal, state or local laws or regulations; (ii) cost and stability of energy sources; (iii) cost and availability of raw materials; (iv) management's ability to predict accurately the adequacy of the Company's present liquidity to meet future financial requirements; (v) continued solvency of any third parties on leases the Company has guaranteed; (vi) management's ability to predict the required contributions to the pension plans of the Company; (vii) the Company's requirement to impair recorded goodwill or long-lived assets; (viii) changes in labor and employee benefit costs, such as increased health care and other insurance costs; (ix) ability to recruit, train and retain effective employees and management in both of the Company's operating subsidiaries; (x) the extent and speed of successful execution of strategic initiatives; (xi) volatility of financial and credit markets which would affect access to capital for the Company; and, (xii) unexpected outcomes of any legal proceedings arising in the normal course of business of the Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and also could cause actual results to differ materially from those included, contemplated or implied by the forward-looking statements made in this report, and the reader should not consider any of the above list of factors and the following discussion to be a complete set of all potential risks or uncertainties.

Risks Related to Harris Teeter

The Supermarket Industry is Highly Competitive. The supermarket industry is characterized by narrow profit margins and competes on value, location and service. Harris Teeter faces increased competitive pressure in all of its markets from existing competitors and from the threatened entry by one or more major new competitors. The number and type of competitors faced by Harris Teeter vary by location and include: traditional grocery retailers (both national and regional), discount retailers such as "supercenters" and "club and warehouse stores," specialty supermarkets, drug stores, dollar stores, convenience stores and restaurants. In addition, certain Harris Teeter supermarkets also compete with local video stores, florists, book stores and pharmacies. Aggressive supercenter expansion, increasing fragmentation of retail formats, entry of non-traditional competitors and market consolidation have further contributed to an increasingly competitive marketplace.

Additionally, increasingly competitive markets and economic uncertainty have made it difficult generally for grocery store operators to achieve comparable store sales gains. Because sales growth has been difficult to attain, Harris Teeter's competitors

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have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to achieve consistent sales gains. Some of Harris Teeter's competitors have greater financial resources and could use these resources to take measures which could adversely affect Harris Teeter's competitive position. Accordingly, Harris Teeter's business, financial condition or results of operations could be adversely affected by competitive factors, including product mix and pricing changes which may be made in response to competition from existing or new competitors.

Harris Teeter's Expansion Plans Are Subject to Risk. Harris Teeter has spent, and intends to continue to spend, significant capital and management resources on the development and implementation of expansion and renovation plans. Harris Teeter's new store opening program has accelerated in recent years and involves expanding the company's Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. The successful implementation of Harris Teeter's renovation and expansion plans are subject to several factors including: the availability of new, suitable locations on reasonable commercial terms, or at all; the success of new stores, including those in new markets; management's ability to manage expansion, including the effect on sales at existing stores when a new store is opened nearby; the ability to secure any necessary financing; change in regional and national economic conditions; and increasing competition or changes in the competitive environment in Harris Teeter's markets.

Harris Teeter's new stores may initially operate at a loss, depending on factors such as prevailing competition and market position in the surrounding communities and the level of sales and profit margins in existing stores may not be duplicated in new stores. Pursuing a strategy of growth, renovation and expansion in light of current highly competitive industry conditions could lead to a near-term decline in earnings as a result of opening and operating a substantial number of new stores, particularly with respect to stores in markets where Harris Teeter does not have a significant presence. If Harris Teeter's expansion and renovation plans are unsuccessful, it could adversely affect Harris Teeter's cash flow, business and financial condition due to the significant amount of capital and management resources invested.

Food Safety Issues Could Result in a Loss of Consumer Confidence and Product Liability Claims. Harris Teeter could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain. These concerns could cause shoppers to avoid purchasing certain products from Harris Teeter, or to seek alternative sources of supply for their food needs, even if the basis for the concern is not valid and/or is outside of the company's control. Adverse publicity about these types of concerns, whether or not valid, could discourage consumers from buying our products and any lost confidence on the part of our customers would be difficult and costly to reestablish. As such, any issue regarding the safety of any food items sold by Harris Teeter, regardless of the cause, could have a substantial and adverse effect on the company's operations.

Harris Teeter's Geographic Concentration May Expose it to Regional or Localized Downturns. Harris Teeter operates primarily in the southeastern United States, with a strong concentration in North Carolina, Virginia and South Carolina. As a result, Harris Teeter's business is more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, changes in the economy, weather conditions, demographics and population. Although the southeast region has experienced economic and demographic growth in the past, a significant economic downturn in the region could have a material adverse effect on Harris Teeter's business, financial condition or results of operations.

The Ownership and Development of Real Estate May Subject Harris Teeter to Environmental Liability. Under applicable environmental laws, as an owner or developer of real estate, Harris Teeter may be responsible for remediation of environmental conditions that may be discovered and may be subject to associated liabilities (including liabilities resulting from lawsuits brought by private litigants) relating to Harris Teeter supermarkets and other buildings and the land on which those buildings are situated, whether the properties are leased or owned, and whether such environmental conditions, if in existence, were created by Harris Teeter or by a prior owner or tenant. The discovery of contamination from hazardous or toxic substances, or the failure to properly remediate such contaminated property, may adversely affect Harris Teeter's ability to sell or rent real property or to borrow using real property as collateral. Liabilities or costs resulting from noncompliance with current or future applicable environmental laws or other claims relating to environmental matters could have a material adverse effect on Harris Teeter's business, financial condition or results of operations.

Harris Teeter's Information Technology Systems Are Subject to Risk. Harris Teeter's business is increasingly dependent on information technology systems that are complex and vital to continuing operations. If Harris Teeter were to experience difficulties maintaining existing systems or implementing new systems, it could incur significant losses due to disruptions in our operations. Additionally, these systems contain valuable proprietary and financial data, as well as debit and credit card cardholder data, and a breach could have an adverse effect on Harris Teeter.

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Risks Related to A&E

A&E Operates in a Competitive Global Industry. A&E competes on a global basis with a large number of manufacturers in the highly competitive sewing thread, embroidery thread and technical textile industries. Maintaining A&E's competitive position may require substantial investments in product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Competitive pressures may also result in decreased demand for A&E's products or force A&E to lower its prices. Other generally adverse economic and industry conditions, including a decline in consumer demand for apparel products, could have a material adverse effect on A&E's business.

A&E May Not Succeed at Integrating Its Acquisitions. In recent years, A&E has expanded its foreign production and distribution capacity by acquiring other manufacturers, entering into joint ventures or starting new businesses. Management expects A&E to continue this activity and expand foreign production and distribution operations through acquisitions, joint ventures or new start-up operations. The process of combining these acquisitions with A&E's existing businesses involves risks. A&E will face challenges in consolidating functions, integrating organizations, procedures, operations and product lines in a timely and efficient manner and retaining key personnel. Failure to successfully manage and integrate acquisitions, joint ventures or new start-up businesses could lead to the potential loss of customers, the potential loss of employees who may be vital to the new operations, the potential loss of business opportunities or other adverse consequences that could affect A&E's financial condition and results of operations. Even if integration occurs successfully, failure of future acquisitions to achieve levels of anticipated sales growth, profitability or productivity may adversely impact A&E's financial condition and results of operations. Additionally, expansions involving foreign markets may present other complexities that may require additional attention from members of management. The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on A&E's revenues, level of expenses and operating results.

A&E Has Substantial International Operations. In fiscal 2010, approximately 54% of A&E's net sales and a large portion of A&E's production occurred outside the United States, primarily in Europe, Latin America and Asia. A&E's corporate strategy includes the expansion and growth of its international business on a worldwide basis, with an emphasis on Asia. As a result, A&E's operations are subject to various political, economic and other uncertainties, including risks of restrictive taxation policies, changing political conditions and governmental restrictions and regulations. A&E's foreign operations also subjects A&E to the risks inherent in currency translations. A&E's global operations make it impossible to eliminate completely all foreign currency translation risks and its impact on A&E's financial results.

A&E Has Raw Material Price Volatility. The significant price volatility of many of A&E's raw materials may result in increased production costs, which A&E may not be able to pass on to its customers. A significant portion of the raw materials A&E uses in manufacturing thread and technical textiles are petroleum-based. The prices for petroleum and petroleum-related products are volatile. While A&E at times in the past has been able to increase product prices due to raw material increases, A&E generally is not able to immediately raise product prices and may be unable to completely pass on underlying cost increases to its customers. Additional raw material and energy cost increases that A&E is not able to fully pass on to customers or the loss of a large number of customers to competitors as a result of price increases could have a material adverse effect on its business, financial condition, results of operations or cash flows.

Other Risks

Narrow Profit Margins may Adversely Affect the Company's Business. Profit margins in the supermarket and thread industries are very narrow. In order to increase or maintain the Company's profit margins, strategies are used to reduce costs, such as productivity improvements, shrink reduction, distribution efficiencies, energy efficiency programs and other similar strategies. Changes in product mix also may negatively affect certain financial measures. If the Company is unable to achieve forecasted cost reductions there may be an adverse effect on the Company's business.

Our Self-Insurance Reserves are Subject to Variability and Unpredictable External Factors. As discussed in more detail below in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Self-insurance Reserves for Workers' Compensation, Healthcare and General Liability," the Company is primarily self-insured for most U.S. workers' compensation claims, healthcare claims and general liability and automotive liability losses. Accordingly, the Company determines the estimated reserve required for claims in each accounting period, which requires that management determine estimates of the costs of claims incurred and accrue for such expenses in the period in which the claims are incurred. The liabilities that have been recorded for these claims represent our best estimate of the ultimate obligations for reported claims plus those incurred but not reported. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, and changes in discount rates could all affect ultimate settlements of claims or the assumptions underlying our liability estimates, which could cause a material change for our self-insurance liability reserves and impact earnings.

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The Company may Incur Increased Pension Expenses. The Company maintains certain retirement benefit plans for substantially all domestic full-time employees and a supplemental retirement benefit plan for certain selected officers of the Company and its subsidiaries, including a qualified pension plan which is a non-contributory, funded defined benefit plan and a non-qualified supplemental pension plan for executives, which is an unfunded defined benefit plan. The Company has frozen participation and benefit accruals under the Company-sponsored defined benefit plan effective September 30, 2005 for all participants, with certain transition benefits provided to those participants who had achieved specified age and service levels on December 31, 2005; however, at the end of fiscal 2010, the Company's pension plans had projected benefit obligations in excess of the fair value of plan assets. The amount of any increase or decrease in our required contributions to our pension plans will depend on government regulation, returns on plan assets and actuarial assumptions regarding our future funding obligations. For more information, see Note 14 to the Consolidated Financial Statements in Item 8 hereof.

Adverse Economic Conditions may Negatively Impact the Company's Operating Results. The increase in unemployment and loss of consumer confidence can alter the consumers' buying habits and demand for apparel products. In addition, consumers may decrease their purchases of more discretionary items and increase their purchase of lower cost food products. Adverse economic conditions in the financial markets, including the availability of financing, could also adversely affect the Company's operating results by increasing costs related to obtaining financing at acceptable rates and reduce our customers' liquidity position. These conditions could materially affect the Company's customers causing reductions or cancellations of existing sales orders and inhibit the Company's ability to collect receivables. In addition, the Company's suppliers may be unable to fulfill the Company's outstanding orders or could change credit terms that would negatively affect the Company's liquidity. All of these factors could adversely impact the Company's results of operations, financial condition and cash flows. 

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The executive office of the Company is located in a leased space of a downtown office tower at 301 S. Tryon Street, Suite 1800, Charlotte, North Carolina, 28202.

Harris Teeter owns its principal offices near Charlotte, North Carolina, a 517,000 square foot distribution facility east of Charlotte, a 1,088,000 square foot distribution facility in Greensboro, North Carolina, and a 90,500 square foot dairy processing plant in High Point, North Carolina. Both distribution facilities contain dry grocery warehousing space and refrigerated storage for perishable goods. In addition, the Greensboro facility has frozen goods storage and a single pick facility for health and beauty care products and other general merchandise. Harris Teeter operates its retail stores primarily from leased properties. As of the end of fiscal 2010, Harris Teeter held title to the land and buildings of five of its supermarkets. The remaining supermarkets are either leased in their entirety or the building is owned and situated on leased land. In addition, Harris Teeter holds interest in properties that are under development for store sites. Harris Teeter's supermarkets range in size from approximately 16,200 square feet to 72,900 square feet, with an average size of approximately 47,800 square feet.

The following table sets forth selected statistics with respect to Harris Teeter stores for each of the last three fiscal years:

                       
        2010     2009     2008  
  Stores Open at Period End     199     189     176  
  Average Weekly Net Sales Per Store*   $ 395,510   $ 405,356   $ 414,101  
  Average Square Footage Per Store at Period End     47,792     47,277     46,708  
  Average Square Footage Per New Store Opened During Period    

50,312

   

51,698

   

48,330

 
  Total Square Footage at Period End     9,510,688     8,935,271     8,220,583  

*Computed on the basis of aggregate sales of stores open for a full year.

A&E's principal offices, five domestic manufacturing plants and one distribution center are all owned by A&E and are all located in North Carolina. Domestic manufacturing and related warehouse facilities have an aggregate of approximately 1,447,000 square feet of floor space. A&E has a domestic dyeing production capacity of approximately 27,000,000 pounds per year. Capacities are based on 168 hours of operations per week. In addition, A&E leases three distribution centers strategically located in its domestic markets with an aggregate of approximately 84,000 square feet of floor space.

Through consolidated subsidiaries, A&E also owns seven international manufacturing and/or distribution facilities with an aggregate of approximately 815,000 square feet of floor space. A&E also leases another 16 international manufacturing and/or

6


distribution facilities with an aggregate of approximately 417,000 square feet of floor space. The foreign consolidated subsidiaries engaged in manufacturing have a dyeing production capacity of approximately 21,500,000 pounds per year. Capacities are based on 168 hours of operations per week. In addition to its consolidated subsidiaries, A&E also has minority interests in various joint ventures and a 50% ownership interest in a joint venture in China.

The Company believes its facilities and those of its operating subsidiaries are adequate for its current operations. However, additional or expanded facilities may be required in strategic regions to support growth in the future.

Item 3. Legal Proceedings

The Company and its subsidiaries are involved in various legal matters from time to time in connection with their operations, including various lawsuits and patent and environmental matters. These matters considered in the aggregate have not had, nor does the Company expect them to have, a material effect on the Company's results of operations, financial position or cash flows.

Item 4. [Removed and Reserved]

Item 4A. Executive Officers of the Registrant

The following list contains the name, age, positions and offices held and period served in such positions or offices for each of the executive officers of the Registrant.

Thomas W. Dickson, age 55, is the Chairman of the Board of Directors, President and Chief Executive Officer of the Company, and has been Chairman of the Board of Directors since March 2006 and President and principal executive officer since February 1997. Prior to that time, he served as Executive Vice President of the Company from February 1996 to February 1997. Prior to that time, from February 1994 to February 1996 he served as President of, and from February 1991 to February 1994 he served as Executive Vice President of, the Company's wholly-owned subsidiary A&E.

John B. Woodlief, age 60, is the Vice President - Finance and Chief Financial Officer of the Company, and has been the Vice President - Finance and principal financial officer of the Company since November 1999. Prior to that time, he served as a partner in PricewaterhouseCoopers since 1998 and a partner in Price Waterhouse from 1985 to 1998. He served as Managing Partner of the Charlotte, North Carolina office of Price Waterhouse and PricewaterhouseCoopers from January of 1997 to June of 1999. He joined Price Waterhouse in 1972.

Frederick J. Morganthall, II, age 59, was elected President of the Company's wholly-owned subsidiary Harris Teeter on October 30, 1997. Prior to that time, and beginning in October 1996, he served as Executive Vice President of Harris Teeter. He was also Harris Teeter's Senior Vice President of Operations from October 1995 to October 1996, Vice President of Operations from April 1994 to October 1995 and Vice President of Sales and Distribution from October 1992 to April 1994.

Fred A. Jackson, age 60, has been President of A&E since August 1996. Prior to that time, and beginning in January 1996, he served as Executive Vice President of A&E. He was also A&E's Senior Vice President - Industrial Thread Sales from October 1993 to January 1996.

The executive officers of the Company and its subsidiaries are elected annually by their respective Boards of Directors. No executive officer has a family relationship as close as first cousin with any other executive officer, director or nominee for director.

7


PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Information regarding the principal market for the Company's common stock (the "Common Stock"), number of shareholders of record, market price information per share of Common Stock and dividends declared per share of Common Stock for each quarterly period in fiscal 2010 and 2009 is set forth below.

The Common Stock is listed on the New York Stock Exchange. As of November 26, 2010, there were approximately 3,900 holders of record of Common Stock.

Quarterly Information

                             
        First
Quarter
    Second
Quarter
    Third
Quarter
    Fourth
Quarter
 
  Fiscal 2010                          
  Dividend Per Share   $ 0.12   $ 0.12   $ 0.12   $ 0.12  
  Market Price Per Share                          
  High     29.60     32.57     38.16     37.90  
  Low     24.55     25.06     31.48     30.29  
                             
  Fiscal 2009                          
  Dividend Per Share   $ 0.12   $ 0.12   $ 0.12   $ 0.12  
  Market Price Per Share                          
  High     33.74     29.20     26.87     28.00  
  Low     23.81     18.86     22.00     21.77  

The Company expects to continue paying dividends on a quarterly basis which is at the discretion of the Board of Directors and subject to legal and contractual requirements. Information regarding restrictions on the ability of the Company to pay cash dividends is set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity" in Item 7 hereof.

Comparison of Total Cumulative Shareholder Return for Five-Year Period Ending October 3, 2010

The following graph presents a comparison of the yearly percentage change in the Company's cumulative total shareholders' return on Common Stock with the (i) Standard & Poor's 500 Index, (ii) Standard & Poor's Midcap 400 Index, (iii) Standard & Poor's Food Retail Index, and (iv) Standard & Poor's Apparel, Accessories & Luxury Goods Index for the five-year period ended October 3, 2010.

  

8


d27349chart.jpg

                                               
              Cumulative Total Return  
              9/30/05     9/30/06     9/30/07     9/30/08     9/30/09     9/30/10  
  Ruddick Corporation           100.00     115.10     150.52     147.61     123.48     163.41  
  S & P 500           100.00     110.79     129.01     100.66     93.70     103.22  
  S & P Midcap 400           100.00     106.56     126.55     105.44     102.16     120.33  
  S & P Food Retail           100.00     103.80     118.06     88.89     75.01     80.45  
  S & P Apparel, Accessories & Luxury Goods           100.00     112.99     129.19     88.58     92.30     114.76  

                      
  
* $100 invested on 9/30/05 in stock or index, including reinvestment of dividends.

** The Company utilizes two indices, rather than a single index, for its peer group comparison: Standard & Poor's Food Retail Index and Standard & Poor's Apparel, Accessories & Luxury Goods Index. The Company believes that the separate presentation of these indices more accurately corresponds to the Company's primary lines of business.

9


Issuer Purchases of Equity Securities

   The following table summarizes the Company's purchases of its common stock during the quarter ended October 3, 2010.

                             
  Period     Total Number of
Shares Purchased
    Average Price
Paid per Share
    Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
    Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
 
  June 28, 2010 to
August 1, 2010
    - 0 -     n.a.     - 0 -     2,767,169  
  August 2, 2010 to
August 29, 2010
    - 0 -     n.a.     - 0 -     2,767,169  
  August 30, 2010 to
October 3, 2010
    - 0 -     n.a.     - 0 -     2,767,169  
                             
  Total     - 0 -     n.a.     - 0 -     2,767,169  
           
           
  (1)    

In February 1996, the Company announced the adoption of a stock buyback program, authorizing, at management's discretion, the Company to purchase and retire up to 4,639,989 shares, 10% of the then-outstanding shares of the Company's common stock, for the purpose of preventing dilution as a result of the operation of the Company's comprehensive stock option and awards plans. The stock purchases are effected from time to time pursuant to this authorization. As of October 3, 2010, the Company had purchased and retired 1,872,820 shares under this authorization. No stock purchases were made during the quarter ended October 3, 2010. The stock buyback program has no set expiration or termination date.

 

Item 6. Selected Financial Data (dollars in thousands, except per share data)

                                   
        2010     2009 (1)   2008     2007     2006  
                                   
  Net sales   $ 4,400,450   $ 4,077,822   $ 3,992,397   $ 3,639,208   $ 3,265,856  
                                   
  Operating profit     197,971     154,851     173,785     148,174     123,069  
                                   
  Net income     112,041     85,964     96,752     80,688     72,336  
                                   
  Net income per share                                
  Basic     2.32     1.79     2.02     1.69     1.53  
  Diluted     2.31     1.78     2.00     1.68     1.52  
                                   
  Dividend per share     0.48     0.48     0.48     0.44     0.44  
                                   
  Total assets     1,889,886     1,844,321     1,696,407     1,529,689     1,362,936  
                                   
  Long-term debt - including current portion    

308,166

   

365,087

   

320,578

   

264,392

   

237,731

 
                                   
  Stockholder’s equity - Ruddick Corp.     892,449     811,590     823,159     736,250     670,517  
                                   
  Book value per share     18.25     16.72     17.05     15.30     14.10  

Note: The Company's fiscal year ends on the Sunday nearest to September 30. Fiscal year 2010 includes the 53 weeks ended October 3, 2010. Fiscal years 2009, 2008, 2007 and 2006 includes the 52 weeks ended September 27, 2009, September 28, 2008, September 30, 2007 and October 1, 2006, respectively.

           
  (1)     Reference is made to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Goodwill and Long-Lived Asset Impairments" which describes the fiscal 2009 non-cash charges of $9,891,000 ($6,099,000 after tax benefits, or $0.13 per diluted share) for goodwill and long-lived asset impairments recorded by A&E.  

10


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. We have based these forward-looking statements on our current plans, expectations and beliefs about future events. In light of the risks, uncertainties and assumptions discussed under Item 1A "Risk Factors" of this Annual Report on Form 10-K and other factors discussed in this section, there are risks that our actual experience will differ materially from the expectations and beliefs reflected in the forward-looking statements in this section and throughout this report. For more information regarding what constitutes a forward-looking statement, please refer to "Risk Factors" in Item 1A hereof.

Overview

The Company operates primarily in two business segments through two wholly owned subsidiaries: retail grocery (including related real estate and store development activities) - operated by Harris Teeter; and industrial sewing thread (textile primarily), including embroidery thread and technical textiles - operated by A&E. Harris Teeter is a regional supermarket chain operating primarily in the southeastern and mid-Atlantic United States, and the District of Columbia. A&E is a global manufacturer and distributor of sewing thread for the apparel and other markets, embroidery thread and technical textiles. The Company evaluates the performance of its two businesses utilizing various measures which are based on operating profit.

The economic environment has motivated changes in the consumption habits of the retail consumer which has impacted the financial results of both operating subsidiaries. Unprecedented economic uncertainty, tumultuous market conditions and reduced levels of consumer confidence have created a more cautious consumer and increased the competitive environment in Harris Teeter's primary markets. Harris Teeter competes with other traditional grocery retailers, as well as other retail outlets including, but not limited to, discount retailers such as "neighborhood or supercenters" and "club and warehouse stores," specialty supermarkets and drug stores. Generally, Harris Teeter's markets continue to experience new store opening activity and increased feature pricing or everyday low prices by competitors. Harris Teeter utilizes information gathered from various sources, including its Very Important Customer ("VIC") loyalty card program, and works with suppliers to deliver effective retail pricing and targeted promotional spending programs that drive customer traffic and create value for Harris Teeter customers. In addition, Harris Teeter differentiates itself from its competitors with its product selection, assortment and variety, and its focus on customer service.

Harris Teeter has continued with its planned new store development program and has opened 13 new stores and closed 3 stores for a net of 10 additional stores during fiscal 2010. During fiscal 2009, Harris Teeter opened 15 new stores and closed 2 stores for a net of 13 additional stores, and during fiscal 2008, Harris Teeter opened 15 new stores and closed 3 stores for a net of 12 additional stores. Much of Harris Teeter's new store growth is focused on expanding its Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware.

Business conditions for A&E's customers were also negatively impacted by the turbulent economic conditions of fiscal 2009. However, during fiscal 2010, A&E's customers in the retail apparel and non-apparel sectors realized a rebound in retail sales which resulted in increased sales for A&E. Even though A&E's sales for fiscal 2010 improved significantly over fiscal 2009, they were still below the levels achieved in fiscal 2008. A&E's strategic plans continue to include expanding its operations in the Asian markets and the expansion of product lines beyond apparel sewing thread.

A&E's growth in China, India and other Asian markets has been accomplished through additional investments in its wholly owned subsidiaries by way of capital expenditures and through strategic joint ventures. In fiscal 2003, A&E entered into a joint venture in China resulting in a 50% ownership interest in Huamei Thread Company Limited, which is one of the largest thread producers in the China market. During fiscal 2005, A&E acquired an 80% ownership interest in Jimei Spinning Company Limited (a thread yarn spinning company located in China) and increased its ownership interest in Hengmei Spinning Company Limited (another thread yarn spinning company in China) from 60% to 80%. During the third quarter of fiscal 2008, A&E entered into a joint venture with Vardhman Textiles Limited in India ("Vardhman") to manufacture, distribute and sell sewing thread for industrial and consumer markets within India and for export markets. During the first quarter of fiscal 2009, A&E exercised its option to purchase an additional 14% ownership interest in Vardhman under the terms of the original joint venture agreement, which increased A&E's total ownership interest in Vardhman to 49%. A&E continues to transform its business to be more Asian centric, which is in line with the global shifting of A&E's customer base.

A&E also expanded its global presence through new joint venture agreements and increased ownership of existing joint venture arrangements. During fiscal 2005, A&E entered into a joint venture in Brazil resulting in a 30% ownership interest in Linhas Bonfio S.A ("Linhas"). During fiscal 2009, A&E acquired an additional 13% ownership interest in Linhas, which increased A&E's total ownership interest in Linhas to 43%. During fiscal 2010, A&E increased its ownership interest in Hilos A&E Dominicana, Ltd. from 51% to 63% and obtained the remaining 20% ownership interest in its two joint ventures in South Africa.

11


A&E's fiscal 2004 acquisition of certain assets and the U.S. business of Synthetic Thread Company, Inc. provided A&E with an entry into the technical textiles market. A&E expanded its customer base and product line offerings in the technical textiles arena by acquiring certain assets and the U.S. business of Ludlow Textiles Company, Inc. in fiscal 2005. Further diversification was achieved in fiscal 2005 by A&E's acquisition of certain assets and the business of Robison-Anton Textile Co., a U.S. producer of high-quality embroidery threads. The sale of non-apparel threads and yarns resulting from these acquisitions has partially offset sales declines in the U.S. resulting from the shifting of apparel manufacturing. In fiscal 2006, A&E expanded its production and distribution of non-apparel products through the acquisition of TSP Tovarna Sukancev in Trakov d.d. ("TSP") located in Maribor, Slovenia. A&E continues to expand the manufacturing and distribution of non-apparel products throughout its global operations.

A&E continues to face increased operating costs and highly competitive pricing in its markets. Management at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations, and focus on its strategic plans to become more Asian centric.

Results of Operations

Goodwill and Long-Lived Asset Impairments
The deterioration of the economic environment during fiscal 2009, particularly with respect to A&E's customers in the retail apparel and non-apparel markets, caused management to lower the expected future cash flows of A&E's U.S. operating segment during the Company's annual strategic planning process. Based on the revised expectations, A&E was required to perform an interim test for goodwill impairment and, as a result, recorded non-cash impairment charges related to its U.S. operating segment during the third quarter of fiscal 2009. Impairment charges included the write-off of all of the goodwill associated with its U.S. acquisitions previously made in 1995 and 1996 and the write-down of certain long-lived assets of its U.S. operating segment. During fiscal 2009, A&E wrote off $7,654,000 of goodwill and wrote down certain long-lived assets of its U.S. operating segment by $2,237,000. A&E also recorded tax benefits of $3,792,000 related to the impairment charges. An annual impairment review was conducted in the first quarter of fiscal 2010, resulting in no goodwill impairment charge being required as the fair value exceeded the carrying value.

12


Consolidated Overview
The following table sets forth the operating profit components by each of the Company's operating segments and for the holding company ("Corporate") for the 53 weeks ended October 3, 2010 (fiscal 2010), and the 52 weeks ended September 27, 2009 (fiscal 2009) and September 28, 2008 (fiscal 2008). The table also sets forth each of the segment's net income components as a percent to total net sales and the percentage increase or decrease of such components over the prior year (in thousands):

                                                     
        Fiscal 2010     Fiscal 2009     Fiscal 2008     % Inc. (Dec. )
              % to
Sales
          % to
Sales
          % to
Sales
    10 vs
09
    09 vs
08
 
  Net Sales                                                  
  Harris Teeter   $ 4,099,353     93.2   $ 3,827,005     93.8   $ 3,664,804     91.8     7.1     4.4  
  A&E     301,097     6.8     250,817     6.2     327,593     8.2     20.0     (23.4 )
  Total   $ 4,400,450     100.0   $ 4,077,822     100.0   $ 3,992,397     100.0     7.9     2.1  
                                                     
  Gross Profit                                                  
  Harris Teeter   $ 1,227,446     27.89   $ 1,169,441     28.68   $ 1,138,857     28.53     5.0     2.7  
  A&E     72,412     1.65     47,916     1.17     69,590     1.74     51.1     (31.1 )
  Total     1,299,858     29.54     1,217,357     29.85     1,208,447     30.27     6.8     0.7  
                                                     
  SG&A Expenses                                                  
  Harris Teeter     1,045,860     23.77     993,850     24.37     961,092     24.08     5.2     3.4  
  A&E     52,907     1.20     52,646     1.29     67,262     1.68     0.5     (21.7 )
  Corporate     3,120     0.07     6,119     0.15     6,308     0.16     (49.0 )   (3.0 )
  Total     1,101,887     25.04     1,052,615     25.81     1,034,662     25.92     4.7     1.7  
                                                     
  Impairment Charges - A&E                                                  
  Goodwill     -     -     7,654     0.19     -     -     n.m.     n.m.  
  Long-Lived Assets     -     -     2,237     0.05     -     -     n.m.     n.m.  
  Total     -     -     9,891     0.24     -     -     n.m.     n.m.  
                                                     
  Operating Profit (Loss)                                                  
  Harris Teeter     181,586     4.13     175,591     4.31     177,765     4.45     3.4     (1.2 )
  A&E     19,505     0.44     (14,621 )   (0.36 )   2,328     0.06     n.m.     n.m.  
  Corporate     (3,120 )   (0.07 )   (6,119 )   (0.15 )   (6,308 )   (0.16 )   (49.0 )   (3.0 )
  Total     197,971     4.50     154,851     3.80     173,785     4.35     27.8     (10.9 )
                                                     
  Other Expense, net     19,566     0.45     16,068     0.40     19,190     0.48     21.8     (16.3 )
  Income Tax Expense     65,297     1.48     52,225     1.28     57,359     1.44     25.0     (9.0 )
  Net Earnings     113,108     2.57     86,558     2.12     97,236     2.43     30.7     (11.0 )
  Less: Net Earnings Attributable to the Noncontrolling Interest     1,067     0.02     594     0.01     484     0.01     79.8     22.7.  
  Net Earnings Attributable to Ruddick Corporation   $ 112,041     2.55   $ 85,964     2.11   $ 96,752     2.42     30.3     (11.1 )

n.m. - not meaningful

Consolidated net sales increased 7.9% in fiscal 2010 and 2.1% in fiscal 2009 when compared to prior years. The fiscal 2010 increase was attributable to sales improvements at both Harris Teeter and A&E, and an extra week of operations in fiscal 2010. The fiscal 2009 increase resulted from sales improvements at Harris Teeter that were partially offset by sales declines at A&E. Foreign sales for fiscal 2010 represented 3.7% of the consolidated sales of the Company, compared to 3.4% for fiscal 2009 and 4.6% for fiscal 2008. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

The gross profit increase for fiscal 2010 over fiscal 2009 was driven by strong gross profit performance at Harris Teeter and significant gross profit improvement at A&E. The gross profit increase for fiscal 2009 was driven by increased gross profit at

13


Harris Teeter that was offset, in part, by a gross profit decline at A&E when compared to fiscal 2008. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Consolidated selling, general & administrative ("SG&A") expenses increased in fiscal 2010, when compared to fiscal 2009 and fiscal 2008 as a result of the increased operating costs at Harris Teeter driven by store expansion; however, SG&A expenses as a percent to sales decreased in the comparative periods. The decrease in the SG&A margin resulted from: decreased operating costs at A&E since fiscal 2008; Harris Teeter's continued emphasis on operational efficiencies and cost controls; the leverage created through sales gains that apply against fixed costs; and, pre-tax gains of $3.9 million recorded by Corporate during fiscal 2010 in connection with the exchange of the Company's corporate aircraft. Refer to the discussion of segment operations under the caption "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

As discussed previously, A&E recorded non-cash impairment charges of $9,891,000 related to its U.S. operating unit during fiscal 2009. The related income tax benefit of these charges amounted to $3,792,000, resulting in a net reduction to earnings of $6,099,000. Refer to the discussion of segment operations under the caption "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Net other expenses include interest expense, interest income and investment gains and losses. Net interest expense (interest expense less interest income) increased $3.1 million in fiscal 2010 from fiscal 2009 primarily as a result of increased interest associated with capital leases recorded at Harris Teeter. Net interest expense decreased $2.3 million in fiscal 2009 from fiscal 2008, as a result of lower average interest rates on outstanding debt balances. Average outstanding debt balances increased between fiscal 2008 and fiscal 2009 because of increased borrowings under the Company's credit facility and new capital leases entered into in support of Harris Teeter's new store development program.

The effective consolidated income tax rate for fiscal 2010 was 36.6% as compared to 37.6% for fiscal 2009 and 37.1% for fiscal 2008. Income tax expense for fiscal 2010 included a benefit of approximately $870,000 for A&E's write-off of worthless stock in two foreign subsidiaries. As previously disclosed, income tax expense for fiscal 2009 included the removal of $1.6 million of valuation allowances associated with foreign tax credits and adjustments made for an increase in the Company's state income taxes. Income tax expense for fiscal 2008 included refund claims related to prior years of approximately $2.4 million associated with A&E's foreign operations.

As a result of the items discussed above (including the extra week of operations in fiscal 2010), fiscal 2010 consolidated net earnings attributable to the Company increased by $26.1 million, or 30.3%, over fiscal 2009 and net earnings per diluted share increased by 29.8% to $2.31 per share in fiscal 2010 from $1.78 per share in fiscal 2009. Fiscal 2009 consolidated net earnings attributable to the Company decreased by $10.8 million, or 11.1%, over fiscal 2008 and net earnings per diluted share decreased by 11.0% to $1.78 per share in fiscal 2009 from $2.00 per share in fiscal 2008. The non-cash impairment charges recorded by A&E during fiscal 2009 reduced consolidated net earnings by $6.1 million, or $0.13 per diluted share.

Harris Teeter, Retail Grocery Segment
The following table sets forth the consolidated operating profit components for the Company's Harris Teeter supermarket subsidiary for the 53 weeks of fiscal 2010 and the 52 weeks of fiscal years 2009 and 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

                                                     
        Fiscal 2010     Fiscal 2009     Fiscal 2008     % Inc. (Dec. )
              % to
Sales
          % to
Sales
          % to
Sales
    10 vs
09
    09 vs
08
 
  Net Sales   $ 4,099,353     100.00   $ 3,827,005     100.00   $ 3,664,804     100.00     7.1     4.4  
  Cost of Sales     2,871,907     70.06     2,657,564     69.44     2,525,947     68.92     8.1     5.2  
  Gross Profit     1,227,446     29.94     1,169,441     30.56     1,138,857     31.08     5.0     2.7  
  SG&A Expenses     1,045,860     25.51     993,850     25.97     961,092     26.23     5.2     3.4  
  Operating Profit   $ 181,586     4.43   $ 175,591     4.59   $ 177,765     4.85     3.4     (1.2 )

Sales increased 7.1% in fiscal 2010 over fiscal 2009 and 4.4% in fiscal 2009 over fiscal 2008. The increase in sales in fiscal 2010 was attributable to sales from incremental new stores and an extra week of operations. The additional week accounted for approximately 2.0% of the fiscal 2010 sales increase. The increase in sales in fiscal 2009 was attributable to sales from incremental new stores. The sales increases in fiscal 2010 and fiscal 2009 were partially offset by comparable store sales declines in the comparative periods. During fiscal 2010, Harris Teeter opened 13 new stores (2 of which replaced existing stores) and closed 3 stores, for a net addition of 10 stores. During fiscal 2009, Harris Teeter opened 15 new stores (2 of which replaced

14


existing stores) and closed 2 stores, for a net addition of 13 stores. During fiscal 2008, Harris Teeter opened 15 new stores (2 of which replaced existing stores) and closed 3 stores, for a net addition of 12 stores. The increase in sales from new stores exceeded the loss of sales from closed stores by $238.2 million in fiscal 2010, $225.4 million in fiscal 2009 and $275.7 million in fiscal 2008. Comparable store sales (see definition below) decreased by 1.10% ($42.0 million) in fiscal 2010, decreased by 1.49% ($53.1 million) in fiscal 2009, and increased by 2.86% ($91.3 million) in fiscal 2008. Comparable store sales have been negatively impacted by retail price deflation and, to some extent, the cannibalization created by strategically opening stores in key major markets that have a close proximity to existing stores. Management believes that the strategy of opening additional Harris Teeter stores within close proximity to existing stores have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow. Comparable store sales have also been impacted by changes in the purchasing habits of the Harris Teeter customer. In these economic times, our customers are choosing lower priced products and reducing their purchases of more discretionary categories such as floral, tobacco, and certain general merchandise. Both the number of shopping visits and items sold increased during fiscal 2010; however, the value of the average basket was down in fiscal 2010 from fiscal 2009. During fiscal 2010, Harris Teeter experienced average increases in active households per comparable store (based on VIC data) of 1.29%, evidencing a continued growing customer base in those stores. Store brand unit penetration was 23.58% in fiscal 2010, a 43 basis point increase from fiscal 2009.

Harris Teeter considers its reporting of comparable store sales growth to be effective in determining core sales growth during periods of fluctuation in the number of stores in operation, their locations and their sizes. While there is no standard industry definition of "comparable store sales," Harris Teeter has been consistently applying the following definition. Comparable store sales are computed using corresponding calendar weeks to account for the occasional extra week included in a fiscal year. A new store must be in operation for 14 months before it enters into the calculation of comparable store sales. A closed store is removed from the calculation in the month in which its closure is announced. A new store opening within an approximate two-mile radius of an existing store that is to be closed upon the new store opening is included as a replacement store in the comparable store sales measurement as if it were the same store. Sales increases resulting from existing comparable stores that are expanded in size are included in the calculations of comparable store sales, if the store remains open during the construction period. Comparable store sales for fiscal 2010 was computed on a 53-week basis by adding an additional week of sales to fiscal 2009.

Gross profit as a percent to sales declined 62 basis points from fiscal 2009 to fiscal 2010 and declined 52 basis points from fiscal 2008 to fiscal 2009, as a result of additional promotional activity designed to provide more value to Harris Teeter's customers. Increased promotional activity which includes lowering the sales price on selected items (price investment) reduced the gross profit margin by 71 basis points during fiscal 2010 and 72 basis points during fiscal 2009. The reduction in the gross profit margin in fiscal 2010 was offset, in part, by the annual LIFO adjustment. The reduction in fiscal 2009 was offset, in part, by the annual LIFO adjustment and management's emphasis on distribution and manufacturing cost controls and decreased fuel costs. The annual LIFO adjustment was a credit of $1.6 million (0.04% to sales) in fiscal 2010, a charge of $4.4 million (0.12% to sales) in fiscal 2009 and a charge of $8.8 million (0.24% to sales) in fiscal 2008. The LIFO adjustment during the comparable periods was driven by a decrease in annualized product cost inflation for those categories of inventory on the LIFO method of valuation. Distribution operating efficiencies, including lower fuel costs, accounted for a 10 basis point reduction in distribution costs during fiscal 2009.

SG&A expenses increased during fiscal 2010 and fiscal 2009 when compared to prior years, due to incremental store growth and its impact on associated operational costs such as labor, credit and debit card fees, rent and other occupancy costs. The increase in SG&A expenses (excluding advertising and support department costs) over the previous year for stores opened in fiscal 2010 accounted for $45.0 million of the $52.0 million increase in total SG&A expenses from fiscal 2009 to fiscal 2010. The increase in SG&A expenses (excluding advertising and support department costs) over the previous year for stores opened in fiscal 2009 ($38.2 million) exceeded the $32.8 million increase in total SG&A expenses from fiscal 2008 to fiscal 2009. SG&A expenses as a percent to sales decreased 46 basis points from fiscal 2009 to fiscal 2010 and decreased 26 basis points from fiscal 2008 to fiscal 2009, as a result of the leverage created through sales gains that apply against fixed costs, along with improved labor management and cost reductions in support departments. Even though store labor and associated benefit costs increased, as a result of Harris Teeter's new store growth, there was a 23 basis point reduction in these costs as a percent to sales from fiscal 2009 to fiscal 2010 and a 19 basis point reduction from fiscal 2008 to fiscal 2009. Reduced costs in advertising and support departments represented a 42 basis point reduction on a percent to sales basis between fiscal 2009 and 2010 and a 40 basis point reduction between fiscal 2008 and 2009. Included with SG&A expenses are pre-opening costs, which consist of pre-opening rent, labor and associated fringe benefits and recruiting and relocations costs incurred prior to a new store opening and amounted to $8.4 million (0.20% of sales) in fiscal 2010, $14.4 million (0.37% of sales) in fiscal 2009 and $15.4 million (0.42% of sales) in fiscal 2008. Pre-opening costs fluctuate between periods depending on the new store opening schedule and market location.

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As a result of the sales and cost elements described above and one additional week of operations in fiscal 2010, operating profit increased 3.4% in fiscal 2010 from fiscal 2009, as compared to a 1.2% decline in operating profit from fiscal 2008 to fiscal 2009. Harris Teeter continues to invest within its core markets, which management believes have greater potential for improved returns on investment in the foreseeable future. Harris Teeter had 199 stores in operation at the end of fiscal 2010, compared to 189 stores at the end of fiscal 2009 and 176 stores at the end of fiscal 2008.

American & Efird, Industrial Thread Segment
The following table sets forth the consolidated operating profit components for the Company's A&E textile subsidiary for the 53 weeks of fiscal 2010 and the 52 weeks of fiscal years 2009 and 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

                                                     
        Fiscal 2010     Fiscal 2009     Fiscal 2008     % Inc. (Dec. )
              % to
Sales
          % to
Sales
          % to
Sales
    10 vs
09
    09 vs
08
 
  Net Sales   $ 301,097     100.00   $ 250,817     100.00   $ 327,593     100.00     20.0     (23.4 )
  Cost of Sales     228,685     75.95     202,901     80.90     258,003     78.76     12.7     (21.4 )
  Gross Profit     72,412     24.05     47,916     19.10     69,590     21.24     51.1     (31.1 )
  SG&A Expenses     52,907     17.57     52,646     20.99     67,262     20.53     0.5     (21.7 )
  Goodwill Impairment     -     -     7,654     3.05     -     -     n.m.     n.m.  
  Long-Lived Asset Impairments     -     -     2,237     0.89     -     -     n.m.     n.m.  
  Operating (Loss) Profit   $ 19,505     6.48   $ (14,621 )   (5.83 ) $ 2,328     0.71     n.m.     n.m.  

Sales increased 20.0% in fiscal 2010 from fiscal 2009 and decreased 23.4% in fiscal 2009 from fiscal 2008. The fiscal 2010 increase was attributable to sales gains between the comparable fiscal years for the U.S. and all foreign regions driven primarily by improvements in retail sales of apparel and non-apparel. The decrease in fiscal 2009 was driven primarily by sales declines for all regions between the comparable fiscal years as a result of the challenging economic conditions. Foreign sales accounted for approximately 54% of total A&E sales in fiscal 2010, as compared to 55% in both fiscal 2009 and fiscal 2008. Foreign sales, especially in the Asian markets, will continue to be a significant proportion of total A&E sales due to its customers continued shifting of the global production and A&E's strategy of increasing its presence in such global markets. A&E has been successful in supporting its customer base through the geographic shift and management remains committed to its strategic plans that is transforming A&E's business into an Asian-centric global supplier of sewing thread, embroidery thread and technical textiles.

Gross profit, and its percent to net sales, increased from fiscal 2009 to fiscal 2010, as a result of the cost reduction measures taken in fiscal 2009 and improved operating schedules at most of A&E's manufacturing facilities, created by increased sales and inventories being in line with sales volumes. Cost of sales for A&E's U.S. operations increased by $10.1 million from fiscal 2009 to fiscal 2010, and as a percent to sales, gross profit for the U.S. operations increased by 657 basis points. Cost of sales for A&E's foreign operations increased by $15.7 million between the comparable periods and as a percent to sales, gross profit for A&E's foreign operations increased by 354 basis points. Gross profit, and its percent to net sales, decreased during fiscal 2009 when compared to fiscal 2008, primarily as a result of weak sales and decreased levels of plant capacity utilization resulting in poor overhead absorption in the U.S. operations and certain other foreign operations. Cost of sales for A&E's U.S. operations declined by $21.5 million from fiscal 2008 to fiscal 2009 and as a percent to sales, gross profit for the U.S. operations decreased by 275 basis points. Cost of sales for A&E's foreign operations declined by $33.6 million from fiscal 2008 to fiscal 2009 and as a percent to sales, gross profit for A&E's foreign operations decreased by 170 basis points. As previously disclosed, fiscal 2009 gross profit was reduced by $300,000 for severance costs associated with the consolidation of one of A&E's manufacturing facilities in North Carolina into one of A&E's other North Carolina operations. Management continues to focus on optimizing costs in its domestic and certain foreign operations.

SG&A expenses remained relatively flat between fiscal 2009 to fiscal 2010: however, SG&A expenses as a percent to sales declined by 342 basis points. Fiscal 2010 SG&A expenses, excluding profit from non-consolidated subsidiaries, for A&E's U.S. operations increased by $1.2 million; however, these expenses as a percent to sales decreased by 379 basis points from fiscal 2009 to fiscal 2010. Fiscal 2010 SG&A expenses, excluding profit from non-consolidated subsidiaries, for A&E's foreign operations increased by $1.5 million; however, these expenses as a percent to sales decreased by 221 basis points from fiscal 2009 to fiscal 2010. Profit from non-consolidated subsidiaries increased by $2.4 million from fiscal 2009 to fiscal 2010, contributing to a 51 basis point reduction in the SG&A margin between the comparable periods. SG&A expenses decreased from fiscal 2008 to fiscal 2009, as a result of increased net profit from non-consolidated subsidiaries and A&E reducing expenses to more closely match the decline in sales volume; however SG&A expenses as a percent to sales increased primarily due to sales declining faster than the expense reductions achieved during fiscal 2009. SG&A expenses, excluding profit from non-consolidated subsidiaries, for A&E's U.S. operations declined by $6.7 million from fiscal 2008 to fiscal 2009 and as a

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percent to sales, the SG&A margin increased by 126 basis points. SG&A expenses, excluding profit from non-consolidated subsidiaries, for A&E's foreign operations declined by $6.9 million between the comparable periods and as a percent to sales, the SG&A margin increased by 100 basis points. Profit from non-consolidated subsidiaries increased by $1.0 million from fiscal 2008 to fiscal 2009, contributing to a 72 basis point reduction in the SG&A margin between fiscal 2008 and fiscal 2009. The increase in net profit from non-consolidated subsidiaries was driven primarily by A&E's investments in Vardhman during fiscal 2008 and 2009.

As previously disclosed, A&E recorded non-cash impairment charges during fiscal 2009 totaling $9.9 million related to its U.S. operating unit. Impairment charges included $7.7 million for the write-off of all of the goodwill associated with its U.S. acquisitions previously made in 1995 and 1996, and $2.2 million for the write-down of long-lived assets.

As a result of the sales and cost elements described above, A&E realized operating profit of $19.5 million for fiscal 2010, as compared to an operating loss of $14.6 million in fiscal 2009 and operating profit of $2.3 million in fiscal 2008. A&E's operating loss for fiscal 2009 was comprised of $9.9 million of impairment charges discussed above and $4.7 million of operating losses resulting from the challenging economic environment in many parts of the world and its impact on A&E's customers. Management at A&E intends to continue to focus on cost containment and its strategic plans to become more Asian centric. A&E has made good progress in becoming more Asian centric through investments in various non-consolidated subsidiaries that have substantial sales and good operating results. A&E currently has over 60% of its total finishing production capacity located in Asia, including its joint ventures, which emphasizes A&E's progress toward its strategic plans.

Outlook
Harris Teeter's operating performance and the Company's strong financial position provides the flexibility to continue with Harris Teeter's store development program that includes new and replacement stores along with the remodeling and expansion of existing stores. During fiscal 2011, Harris Teeter plans to open 8 new stores (one of which will replace an existing store) and complete major remodels on 8 stores. The fiscal 2011 new store openings are currently scheduled for 2 in the first quarter, 3 in the second quarter, 1 in the third quarter and 2 in the fourth quarter which will result in a 4.1% increase in retail square footage as compared to a 6.4% increase in fiscal 2010. The decrease in planned new store openings from fiscal 2010 to fiscal 2011 reflects the Company's efforts, as previously initiated and disclosed, to delay new store openings during these challenging economic times. The annual number of new store openings in future years is expected to be similar to current plans for fiscal 2011. Management will continue to evaluate Harris Teeter's capital expenditures during these times of economic uncertainty and will adjust its strategic plan accordingly. In addition, Harris Teeter routinely evaluates its existing store operations in regards to its overall business strategy and from time to time will close or divest older or underperforming stores.

The new store program anticipates the continued expansion of Harris Teeter's existing markets, including the Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. Real estate development by its nature is both unpredictable and subject to external factors including weather, construction schedules and costs. Any change in the amount and timing of new store development would impact the expected capital expenditures, sales and operating results.

Startup costs associated with opening new stores under Harris Teeter's store development program can negatively impact operating margins and net income. In the current competitive environment, promotional costs to maintain market share could also negatively impact operating margins and net income in future periods. The continued execution of productivity initiatives implemented throughout all stores, maintaining controls over waste, implementation of operating efficiencies and effective merchandising strategies will dictate the pace at which Harris Teeter's operating results could improve, if at all.

A&E has been able to diversify its customer base, product mix and geographical locations through acquisitions and joint venture agreements completed in recent years. In addition, A&E continues to increase its investment in China and India to support the growth opportunities in these countries and to become more Asian centric. Although A&E has benefited from improved business conditions and the cost reduction measures taken in fiscal 2009, the economic environment for A&E's customers could worsen in the future. A&E management continues to focus on providing best-in-class service to its customers and expanding its product lines throughout A&E's global supply chain. In addition, management intends to continue to evaluate its structure to best position A&E to take advantage of opportunities available through its enhanced international operations.

On November 30, 2010, the Company closed on the sale of its interest in a foreign investment company. As a result of this transaction, the Company will record a pre-tax gain of approximately $19 million during the first quarter of fiscal 2011.

The Company's management remains cautious in its expectations for fiscal 2011 due to the current economic environment and its impact on the Company's customers. Harris Teeter will continue to refine its merchandising strategies to respond to the changing shopping demands and to maintain or increase its customer base. The retail grocery market remains intensely competitive and there is no assurance that the recent improvements in the textile and apparel industries will continue. Any operating improvement will be dependent on the Company's ability to increase Harris Teeter's market share, to continue to rationalize A&E's operations, to offset increased operating costs with additional operating efficiencies, and to effectively execute the Company's strategic expansion plans.

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Capital Resources and Liquidity

The Company is a holding company which, through its wholly-owned operating subsidiaries, Harris Teeter and A&E, is engaged in the primary businesses of retail grocery and the manufacturing and distribution of industrial thread, technical textiles and embroidery thread, respectively. The Company has no material independent operations, nor material assets, other than the investments in its operating subsidiaries, as well as certain property and equipment, cash equivalents and life insurance contracts to support corporate-wide operations and benefit programs. The Company provides a variety of services to its subsidiaries and is dependent upon income and associated cash flows from its operating subsidiaries.

The Company's principal source of liquidity has been cash generated from operating activities and borrowings available under the Company's credit facility. During fiscal 2010, the net cash provided by operating activities was $243.7 million, compared to $233.7 million during fiscal 2009 and $227.2 million during fiscal 2008. Investing activities during fiscal 2010 required net cash of $124.8 million, compared to $218.8 million during fiscal 2009 and $226.2 million during fiscal 2008. Historically, capital spending has been financed by cash provided by operating activities and supplemented with borrowings under the Company's credit facility. Financing activities for fiscal 2010 utilized $82.8 million of cash and included a repayment of $52.9 million of borrowings under the Company's credit facility. Financing activity also includes $29.3 million for the payment of dividends in fiscal 2010 (consisting of 5 quarterly payments), compared to $17.5 million in fiscal 2009 (consisting of 3 quarterly payments) and $23.2 million in fiscal 2008 (consisting of 4 quarterly payments).

During fiscal 2010, consolidated capital expenditures totaled $132.1 million. Harris Teeter capital expenditures were $106.7 million in fiscal 2010, compared to $206.7 million in fiscal 2009 and $192.2 million in fiscal 2008. A&E's capital expenditures were $3.9 million during fiscal 2010, compared to $2.5 million during fiscal 2009 and $7.3 million in fiscal 2008. Fiscal 2010 capital expenditures also included $21.5 million for the exchange of the corporate aircraft, which was partially offset by $14.4 million of proceeds from the sale of the old aircraft. In connection with the development of certain of its new stores, Harris Teeter invested an additional $21.3 million which was partially offset by $13.8 million received from property investment sales and partnership distributions during fiscal 2010. Also in fiscal 2010, A&E spent $0.3 million to acquire the noncontrolling interest in its joint ventures in South Africa and now has a 100% ownership interest. Fiscal 2011 consolidated capital expenditures are planned to total approximately $174 million, consisting of $165 million for Harris Teeter and $9 million for A&E. Harris Teeter anticipates that its investment in new store growth and store remodels will be concentrated in its existing markets in fiscal 2011 as well as the foreseeable future. A&E expects to mainly invest in the modernization of its global operations. Such capital investment is expected to be financed by internally generated funds, liquid assets and borrowings under the Company's credit facility. Management believes that the Company's revolving line of credit provides sufficient liquidity for what management expects the Company will require through the expiration of the line of credit in December 2012.

The Company's credit facility was entered into on December 20, 2007 with eleven banks and provides for a five-year revolving credit facility ("Revolving Credit Facility") in the aggregate amount of up to $350 million and a non-amortizing term loan of $100 million due December 20, 2012. The credit agreement also provides for an optional increase of the Revolving Credit Facility by an additional amount of up to $100 million and two 1-year maturity extension options, both of which require the consent of the lenders. The amount which may be borrowed from time to time and the interest rate on any outstanding borrowings are each dependent on a leverage factor. The leverage factor is based on a ratio of rent-adjusted consolidated funded debt divided by earnings before interest, taxes, depreciation, amortization and operating rents, as set forth in the credit agreement. The more significant of the financial covenants which the Company must meet during the term of the credit agreement include a maximum leverage ratio and a minimum fixed charge coverage ratio. As of October 3, 2010, the Company was in compliance with all financial covenants of the credit agreement and no borrowings were outstanding under the Revolving Credit Facility. Issued letters of credit reduce the amount available for borrowings under the Revolving Credit Facility and amounted to $23.7 million as of October 3, 2010. In addition to the $326.3 million of borrowings available under the Revolving Credit Facility as of October 3, 2010, the Company has the capacity to borrow up to an aggregate amount of $33.7 million from two major U.S. life insurance companies utilizing certain insurance assets as collateral. In the normal course of business, the Company will continue to evaluate other financing opportunities based on the Company's needs and market conditions.

Covenants in certain of the Company's long-term debt agreements limit the total indebtedness that the Company may incur. As of October 3, 2010, the amount of additional debt that could be incurred within the limitations of the most restrictive debt covenants exceeded the additional borrowings available under the Revolving Credit Facility. As such, Management believes that the limit on indebtedness does not restrict the Company's ability to meet future liquidity requirements through borrowings available under the Company's Revolving Credit Facility, including any liquidity requirements expected in connection with the Company's expansion plans for the foreseeable future.

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Contractual Obligations and Commercial Commitments

The Company has assumed various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements, such as debt and lease agreements. Management expects that cash provided by operations and other sources of liquidity, such as the Company's Revolving Credit Facility and new sources of financing available to the Company, will be sufficient to meet these obligations on a short and long-term basis. The following table represents the scheduled maturities of the Company's contractual obligations as of October 3, 2010 (in thousands):

                                   
        Total     Less than
1 Year
    1-3 Years     3-5 Years     More than
5 Years
 
  Long-Term Debt (1)   $ 271,199   $ 19,806   $ 120,810   $ 16,278   $ 114,305  
  Operating Leases (1) (2)     1,427,213     96,367     195,249     193,598     941,999  
  Capital Lease Obligations (1) (2)     192,381     10,675     21,396     21,473     138,837  
  Purchase Obligations - Fixed Assets     38,412     38,412     -     -     -  
  Purchase Obligations - Inventory     1,585     1,585     -     -     -  
  Purchase Obligations - Service Contracts/Other     94,217     31,376     39,826     23,015     -  
  Unrecognized Tax Liability (3)     5,222     1,338     3,884     -     -  
  Other Long-Term Liabilities (4)     13,224     1,600     3,115     2,682     5,827  
  Total Contractual Cash Obligations   $ 2,043,453   $ 201,159   $ 384,280   $ 257,046   $ 1,200,968  
           
           
  (1)     For a more detailed description of the obligations see Notes 6 and 7 to the Consolidated Financial Statements in Item 8 hereof. Amounts represent total expected payments of principal and interest. Payment on variable interest debt is estimated using an interest rate of 2.2% applied to the outstanding balance.  
           
  (2)     Represents the minimum rents payable and includes leases associated with closed stores. The obligations related to the closed store leases are discussed below. Amounts are not offset by expected sublease income and do not include various contingent liabilities associated with assigned leases as discussed below.  
           
  (3)     For a more detailed description of the obligation refer to Note 12 to the Consolidated Financial Statements in Item 8 hereof. The timing of payment, if any, for the unrecognized tax liability is not certain. However, we believe that we could possibly be assessed on the tax issues within the next three years.  
           
  (4)     Represents the projected cash payments associated with certain deferred compensation contracts. The net present value of these obligations is recorded by the Company and included with other long-term liabilities in the Company's consolidated balance sheets.  

In connection with the closing of certain store locations, Harris Teeter has assigned leases to several sub-tenants with recourse. These leases expire over the next 11 years, and the future minimum lease payments of approximately $42.4 million, in the aggregate, over that future period have been assumed by these sub-tenants In the unlikely event, in management's opinion based on the current operations and credit worthiness of the assignees, that all such contingent obligations would be payable by Harris Teeter, the approximate aggregate amounts due by year would be as follows: $7.6 million in fiscal 2011 (22 stores), $7.1 million in fiscal 2012 (21 stores), $6.0 million in fiscal 2013 (16 stores), $5.1 million in fiscal 2014 (14 stores), $4.6 million in fiscal 2015 (10 stores) and $12.0 million in aggregate during all remaining years thereafter.

The Company utilizes various standby letters of credit and bonds as required from time to time by certain programs, most significantly for self-insured programs such as workers compensation and various casualty insurance. These letters of credit and bonds do not represent additional obligations of the Company since the underlying liabilities are recorded as insurance reserves and included with other current liabilities on the Company's consolidated balance sheets. In addition, the Company occasionally utilizes documentary letters of credit for the purchase of merchandise in the normal course of business. Issued and outstanding letters of credit totaled $23.7 million at October 3, 2010.

Off Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company's financial condition, results of operations or cash flows.

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Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. Future events and their effects cannot be determined with absolute certainty. Therefore, management's determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on various factors including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. Actual results could differ from those estimates. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances dictate.

Management has identified the following accounting policies as the most critical in the preparation of the Company's financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain.

Vendor Rebates, Credits and Promotional Allowances
Consistent with standard practices in the retail industry, Harris Teeter receives allowances from vendors through a variety of programs and arrangements. Given the highly promotional nature of the retail supermarket industry, the allowances are generally intended to defray the costs of promotion, advertising and selling the vendor's products. Examples of such arrangements include, but are not limited to, promotional, markdown and rebate allowances; cooperative advertising funds; volume allowances; store opening discounts and support; and slotting, stocking and display allowances. The amount of such allowances may be determined on the basis of (1) a fixed dollar amount negotiated with the vendor, (2) an amount per unit purchased or as a percentage of total purchases from the vendor, or (3) amounts based on sales to the customer, number of stores, in-store displays or advertising. The proper recognition and timing of accounting for these items are significant to the reporting of the results of operations of the Company. The Company applies the authoritative guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 104 ("SAB No. 104") - Revenue Recognition, Subtopic 605-50 of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), and other authoritative guidance as appropriate. Under SAB No. 104, revenue recognition requires, as a prerequisite, the completion of the earnings process and its realization or assurance of realizability. Vendor rebates, credits and other promotional allowances that relate to Harris Teeter's buying and merchandising activities, including lump-sum payments associated with long-term contracts, are recorded as a component of cost of sales as they are earned, the recognition of which is determined in accordance with the underlying agreement with the vendor, the authoritative guidance and completion of the earning process. Portions of vendor allowances that are refundable to the vendor, in whole or in part, by the nature of the provisions of the contract are deferred from recognition until realization is reasonably assured.

Harris Teeter's practices are in accordance with ASC Subtopic 605-50 and are based on the premise that the accounting for these vendor allowances should follow the economic substance of the underlying transactions, which is evidenced by the agreement with the vendor as long as the allowance is distinguishable from the merchandise purchase. Consistent with this premise, Harris Teeter recognizes allowances when the purpose for which the vendor funds were intended and committed to be used has been fulfilled and a cost has been incurred by the retailer. Thus, it is the Company's policy to recognize the vendor allowance consistent with the timing of the recognition of the expense that the allowance is intended to reimburse and to determine the accounting classification consistent with the economic substance of the underlying transaction. Where the Company provides an identifiable benefit or service to the vendor apart from the purchase of merchandise, that transaction is recorded separately. For example, co-operative advertising allowances are accounted for as a reduction of advertising expense in the period in which the advertising cost is incurred. If the advertising allowance exceeds the cost of advertising, then the excess is recorded against the cost of sales in the period in which the related expense is recognized.

There are numerous types of rebates and allowances in the retail industry. The Company's accounting practices with regard to some of the more typical arrangements are discussed as follows. Vendor allowances for price markdowns are credited to the cost of sales during the period in which the related markdown was taken and charged to the cost of sales. Slotting and stocking allowances received from a vendor to ensure that its products are carried or to introduce a new product at the Company's stores are recorded as a reduction of cost of sales over the period covered by the agreement with the vendor based on the estimated inventory turns of the merchandise to which the allowance applies. Display allowances are recognized as a reduction of cost of sales in the period earned in accordance with the vendor agreement based on the estimated inventory turns of the merchandise to which the allowance applies. Volume rebates by the vendor in the form of a reduction of the purchase price of the merchandise reduce the cost of sales when the related merchandise is sold. Generally, volume rebates under a structured purchase program with allowances awarded based on the level of purchases are recognized, when realization is assured, as a reduction in the cost of sales in the appropriate monthly period based on the actual level of purchases in the period relative to the total purchase commitment and adjusted for the estimated inventory turns of the merchandise. Some of these typical vendor rebate, credit and

20


promotional allowance arrangements require that the Company make assumptions and judgments regarding, for example, the likelihood of attaining specified levels of purchases or selling specified volumes of products, the duration of carrying a specified product and the estimation of inventory turns. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances dictate.

Inventory Valuation
The inventories of the Company's operating subsidiaries are valued at the lower of cost or market with the cost of substantially all domestic U.S. inventories being determined using the last-in, first-out (LIFO) method. Foreign inventories and limited categories of domestic inventories are valued on the weighted average and on the first-in, first-out (FIFO) cost methods. LIFO assumes that the last costs in are the ones that should be used to measure the cost of goods sold, leaving the earlier costs residing in the ending inventory valuation. The Company uses the "link chain" method of computing dollar value LIFO whereby the base year values of beginning and ending inventories are determined using a cumulative price index. The Company generates an estimated internal index to "link" current costs to the original costs of the base years in which the Company adopted LIFO. The Company's determination of the LIFO index is driven by the change in current year costs, as well as the change in inventory quantities on hand. Under the LIFO valuation method at Harris Teeter, all retail store inventories are initially stated at estimated cost as calculated by the Retail Inventory Method (RIM). Under RIM, the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry due to its practicality. Inherent in the RIM calculation are certain significant management judgments and estimates, including markups, markdowns, lost inventory (shrinkage) percentages and the purity and similarity of inventory sub-categories as to their relative inventory turns, gross margins and on hand quantities. These judgments and estimates significantly impact the ending inventory valuation at cost, as well as gross margin. Management believes that the Company's RIM provides an inventory valuation which reasonably approximates cost and results in carrying the inventory at the lower of cost or market. Management does not believe that the likelihood is significant that materially higher LIFO reserves are required given its current expectations of on-hand inventory quantities and costs.

The proper valuation of inventory also requires management to estimate the net realizable value of the Company's obsolete and slow-moving inventory at the end of each period. Management bases its net realizable values upon many factors including historical recovery rates, the aging of inventories on hand, the inventory movement of specific products and the current economic conditions. When management has determined inventory to be obsolete or slow moving, the inventory is reduced to its net realizable value by recording an obsolescence reserve. Given the Company's experiences in selling obsolete and slow-moving inventory, management believes that the amounts of the obsolescence reserves to the carrying values of its inventories are materially adequate.

With regard to the proper valuations of inventories, management reviews its judgments, assumptions and other relevant, significant factors on a routine basis and makes adjustments where the facts and circumstances dictate.

Self-insurance Reserves for Workers' Compensation, Healthcare and General Liability
The Company is primarily self-insured for most U.S. workers' compensation claims, healthcare claims and general liability and automotive liability losses. The Company has purchased insurance coverage in order to establish certain limits to its exposure on a per claim basis.

Actual U.S. workers' compensation claims, and general liability and automotive liability losses, are reported to the Company by third party administrators. The third party administrators also report initial estimates of related loss reserves. The open claims and initial loss reserves are subjected to examination by the Company's risk management and accounting management utilizing a consistent methodology which involves various assumptions, judgment and other factors. Such factors include but are not limited to the probability of settlement, the amount at which settlement can be achieved, the probable duration of the claim, the cost development pattern of the claim and the applicable cost development factor. The Company determines the estimated reserve required for U.S. worker compensation claims in each accounting period. This requires that management determine estimates of the costs of claims incurred and accrue for such expenses in the period in which the claims are incurred. The Company measures the liabilities associated with claims for workers' compensation, general liability and automotive liability at Harris Teeter through the use of actuarial methods to project an estimate of ultimate cost for claims incurred. The estimated cost for claims incurred are discounted to present values using a discount rate representing a return on high-quality fixed income securities with an average maturity equal to the average payout of the related liability. Harris Teeter liabilities represent approximately 96% of the total Company self-insurance reserves for workers compensation, general liability and automotive liability claims. For liabilities associated with A&E's workers' compensation, general liability and automotive liability claims, management estimates the ultimate cost for claims incurred based on actual claims, reviewed for the status and probabilities associated with potential settlement and then adjusts them by development factors from published insurance industry sources. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances

21


dictate. Management does not believe the likelihood is significant that existing worker compensation claims, general liability claims and automotive liability claims will be settled for materially higher amounts than those accrued.

The variety of healthcare plans available to employees are primarily self-insured. The Company records an accrual for the estimated amount of self-insured healthcare claims incurred but not yet reported using an actuarial method of applying a development factor to the reported claims amount. The most significant factors which impact on the determination of the required accrual are the historical pattern of the timeliness of claims processing, changes in the nature or types of benefit plans, changes in the plan benefit designs, employer-employee cost sharing factors, and medical trends and inflation. Historical experience and industry trends are continually monitored, and accruals are adjusted when warranted by changes in facts and circumstances. The Company believes that the total healthcare cost accruals are reasonable and adequate to cover future payments on pre-existing claims.

Impairment of Long-lived Assets and Closed Store Obligations
The Company assesses its long-lived assets for possible impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net non-discounted cash flows expected to be generated by the asset. An impairment loss is recognized for any excess of net book value over the estimated fair value of the asset impaired. The fair value is estimated based on expected future cash flows.

The value of property and equipment associated with closed stores and facilities is adjusted to reflect recoverable values based on the Company's prior history of disposing of similar assets and current economic conditions. Management continually reviews its fair value estimates and records impairment charges for assets held for sale when management determines, based on new information which it believes to be reliable, that such charges are appropriate.

The results of impairment tests are subject to management's estimates and assumptions of projected cash flows and operating results. The Company believes that, based on current estimates and assumptions of projected cash flows, materially different reported results are not likely to result from long-lived asset impairments. However, a change in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported results.

The Company records liabilities for closed stores that are under long-term lease agreements. The liability represents an estimate of the present value of the remaining non-cancelable lease payments after the anticipated closing date, net of estimated subtenant income. The closed store liabilities usually are paid over the lease terms associated with the closed stores, unless settled earlier. Harris Teeter management estimates the subtenant income and future cash flows based on its historical experience and knowledge of (1) the market in which the store is located, (2) the results of its previous efforts to dispose of similar assets and (3) the current economic conditions. The actual cost of disposition for these leases is affected by specific real estate markets, inflation rates and general economic conditions and may differ significantly from those assumed and estimated.

Store closings generally are completed within one year after the decision to close. Adjustments to closed store liabilities primarily relate to changes in subtenants and actual costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess store closing liability remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. The Company constantly reviews the relevant, significant factors used in its estimates and makes adjustments where the facts and circumstances dictate.

Retirement Plans and Post-Retirement Benefit Plans
The Company maintains certain retirement benefit plans for substantially all domestic full-time employees and supplemental retirement benefit plans for certain selected directors and officers of the Company and its subsidiaries. Employees in foreign subsidiaries participate to varying degrees in local pension plans, which, in the aggregate, are not significant. The qualified pension plan is a non-contributory, funded defined benefit plan, while the non-qualified supplemental retirement benefit plans are unfunded, defined benefit plans. The Company's current funding policy for its qualified pension plan is to contribute annually an amount in excess of the contributions required by regulatory authorities to meet minimum funding requirements, as determined by its actuaries to be effective in increasing the funding ratios and reducing the volatility of future contributions.

The Company has certain deferred compensation arrangements which allow or allowed in prior years its directors, officers and selected key management personnel to forego the receipt of earned compensation for specified periods of time. The Company may also, from time to time, make discretionary annual contributions into the Director Deferral Plan on behalf of its outside directors. These plans are unfunded. The Company utilizes a rabbi trust to hold assets set aside to pay the respective liabilities of these plans. For further disclosures regarding the Company's pension and deferred compensation plans, see the Note 14 to the Consolidated Financial Statements in Item 8 hereof.

The Company maintains a post-retirement healthcare plan for retirees whose sum of age and years of service equal at least 75 at retirement. The plan continues coverage from early retirement date until the earlier date of eligibility for Medicare or any other employer's medical plan. The Company requires that the retiree pay the estimated full cost of the coverage. The Company

22


also provides a $5,000 post-retirement mortality benefit to a small number of retirees under a prior plan. The obligations and expenses associated with each of these benefit plans are not material.

The determination of the Company's obligation and expense for pension, deferred compensation and other post-retirement benefits is dependent on certain assumptions selected by management and used by the Company and its actuaries in calculating such amounts. The more significant of those assumptions applicable to the qualified pension plan include the discount rate, the expected long-term rate of return on plan assets, the rates of increase in future compensation and the rates of future employee turnover. Those assumptions also apply to determinations of the obligations and expense of the following plans, except as noted: (1) supplemental pension - no funded assets to be measured, and (2) deferred compensation arrangement and post-retirement mortality benefit - no funded assets to be measured and no dependency on future rates of compensation or turnover. In accordance with generally accepted accounting principles, actual results that differ from management's assumptions are accumulated and amortized over future periods and, therefore, generally affect the Company's recognized expense and recorded obligation in such future periods. While management believes that its selections of values for the various assumptions are appropriate, significant differences in actual experience or significant changes in the assumptions may materially affect pension and other post-retirement obligations and future expense.

Recent Accounting Standards

In June 2009, the FASB issued an update to its authoritative literature for the consolidation of variable interest entities ("VIE"). The guidance is incorporated in ASC Topic 810 and requires reporting entities to evaluate former qualifying special purpose entities for consolidation, changes the approach to determining a VIE's primary beneficiary from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. It also clarifies, but does not significantly change, the characteristics that identify a VIE. The new guidance also requires additional year-end and interim disclosures. The updated standards become effective for the Company's 2011 fiscal year beginning on October 4, 2010. Based upon preliminary evaluations, the Company does not expect a significant impact on its consolidated financial statements upon adoption of the new standards.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments. The Company's exposure to market risks results primarily from changes in interest rates. Generally, the fair value of debt with a fixed interest rate will increase as interest rates fall, and the fair value will decrease as interest rates rise. As of October 3, 2010, the Company had two interest rate swap agreements accounted for as cash flow hedge derivatives and no significant foreign exchange exposure.

The table below presents principal cash flows and related weighted average interest rates by expected maturity dates for the Company's Senior Notes due at various dates through 2017 (which accounts for 94% of the Company's fixed interest debt obligations):

                                                     
        2011     2012     2013     2014     2015     Thereafter     Total     Fair Value  
  Senior Notes   $ 7,142   $ -   $ -   $ -   $ -   $ 100,000   $ 107,142   $ 133,751  
  Weighted average interest rate     6.48 %   -     -     -     -     7.64 %   7.56 %      

For a more detail description of fair value, see Note 9 to the Consolidated Financial Statements in Item 8 hereof.

During fiscal 2009, the Company entered into two separate three-year interest rate swap agreements with an aggregate notional amount of $80 million. The swap agreements effectively fixed the interest rate on $80 million of the Company's term loan, of which $40 million is at 1.81% and $40 million is at 1.80%, excluding the applicable margin and associated fees. The fair value of these derivatives are recorded on the balance sheet at their respective fair value and amounted to a liability of $1,654,000 as of October 3, 2010. For a more detail description of fair value, see Note 8 to the Consolidated Financial Statements in Item 8 hereof.

23


Item 8. Financial Statements and Supplementary Data

RUDDICK CORPORATION
AND CONSOLIDATED SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

           
        Page  
           
  Reports of Independent Registered Public Accounting Firm     25  
           
  Consolidated Balance Sheets, October 3, 2010 and September 27, 2009     27  
           
  Statements of Consolidated Operations for the fiscal years ended October 3, 2010,        
  September 27, 2009 and September 28, 2008     28  
           
  Statements of Consolidated Shareholders' Equity and Comprehensive Income for the        
  fiscal years ended October 3, 2010, September 27, 2009 and September 28, 2008     29  
           
  Statements of Consolidated Cash Flows for the fiscal years ended October 3, 2010,        
  September 27, 2009 and September 28, 2008     31  
           
  Notes to Consolidated Financial Statements     32  
           
  Schedule I- Valuation and Qualifying Accounts and Reserves for the fiscal years ended October 3, 2010, September 27, 2009 and September 28, 2008     S-1  

24


Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Ruddick Corporation:

We have audited the accompanying consolidated balance sheets of Ruddick Corporation and subsidiaries (the Company) as of October 3, 2010 and September 27, 2009, and the related consolidated statements of operations, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended October 3, 2010. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule "Valuation and Qualifying Accounts and Reserves." These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as of October 3, 2010 and September 27, 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended October 3, 2010, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of October 3, 2010, based on criteria established in "Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)," and our report dated December 1, 2010 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP
Charlotte, North Carolina
December 1, 2010

25


Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Ruddick Corporation:

We have audited Ruddick Corporation and subsidiaries' (the Company) internal control over financial reporting as of October 3, 2010, based on criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 3, 2010, based on criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ruddick Corporation and subsidiaries as of October 3, 2010 and September 27, 2009, and the related consolidated statements of operations, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended October 3, 2010, and our report dated December 1, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
Charlotte, North Carolina
December 1, 2010

26


CONSOLIDATED BALANCE SHEETS
RUDDICK CORPORATION AND SUBSIDIARIES
(dollars in thousands)

                 
        October 3,     September 27,  
        2010     2009  
                 
  ASSETS              
  Current Assets              
  Cash and Cash Equivalents   $ 73,612   $ 37,310  
  Accounts Receivable, Net of Allowance For Doubtful Accounts of $3,473 and $3,690     99,407     80,146  
  Refundable Income Taxes     16,767     9,707  
  Inventories     320,506     310,271  
  Deferred Income Taxes     2,236     6,502  
  Prepaid Expenses and Other Current Assets     32,443     30,350  
  Total Current Assets     544,971     474,286  
                 
  Property              
  Land     21,398     21,430  
  Buildings and Improvements     266,631     269,508  
  Machinery and Equipment     1,046,532     1,001,572  
  Leasehold Improvements     769,083     734,024  
  Total, at Cost     2,103,644     2,026,534  
  Accumulated Depreciation and Amortization     1,035,837     946,208  
  Property, Net     1,067,807     1,080,326  
                 
  Investments     174,733     156,434  
  Deferred Income Taxes     977     30,285  
  Goodwill     515     515  
  Intangible Assets     21,434     23,754  
  Other Long-Term Assets     79,449     78,721  
  Total Assets   $ 1,889,886   $ 1,844,321  
                 
  LIABILITIES AND SHAREHOLDERS' EQUITY              
  Current Liabilities              
  Notes Payable   $ 6,785   $ 7,056  
  Current Portion of Long-Term Debt and Capital Lease Obligations     12,035     9,526  
  Accounts Payable     228,748     227,901  
  Dividends Payable     -     5,825  
  Deferred Income Taxes     159     68  
  Accrued Compensation     64,102     65,295  
  Other Current Liabilities     90,218     87,194  
  Total Current Liabilities     402,047     402,865  
                 
  Long-Term Debt and Capital Lease Obligations     296,131     355,561  
  Deferred Income Taxes     1,721     580  
  Pension Liabilities     185,445     168,060  
  Other Long-Term Liabilities     105,619     98,892  
  Commitments and Contingencies     -     -  
                 
  Equity              
  Common Stock, no par value - Shares Outstanding: 2010 - 48,901,482 2009 - 48,545,080    

98,285

   

89,878

 
  Retained Earnings     918,843     830,236  
  Accumulated Other Comprehensive Loss     (124,679 )   (108,524 )
  Total Equity of Ruddick Corporation     892,449     811,590  
  Noncontrolling Interest     6,474     6,773  
  Total Equity     898,923     818,363  
  Total Liabilities and Equity   $ 1,889,886   $ 1,844,321  
     
  See Notes to Consolidated Financial Statements  

27


STATEMENTS OF CONSOLIDATED OPERATIONS
RUDDICK CORPORATION AND SUBSIDIARIES
(dollars in thousands, except per share data)

                       
        53 Weeks Ended     52 Weeks Ended     52 Weeks Ended  
        October 3,     September 27,     September 28,  
        2010     2009     2008  
  Net Sales   $ 4,400,450   $ 4,077,822   $ 3,992,397  
  Cost of Sales     3,100,592     2,860,465     2,783,950  
  Selling, General and Administrative Expenses     1,101,887     1,052,615     1,034,662  
  Goodwill Impairment Charge     -     7,654     -  
  Long-Lived Asset Impairment Charge     -     2,237     -  
  Operating Profit     197,971     154,851     173,785  
  Interest Expense     20,072     17,307     20,334  
  Interest Income     (196 )   (493 )   (1,185 )
  Net Investment (Gain) Loss     (310 )   (746 )   41  
  Earnings Before Income Taxes     178,405     138,783     154,595  
  Income Tax Expense     65,297     52,225     57,359  
  Net Earnings     113,108     86,558     97,236  
  Less: Net Earnings Attributable to Noncontrolling Interest     1,067     594     484  
                       
  Net Earnings Attributable to Ruddick Corporation   $ 112,041   $ 85,964   $ 96,752  
                       
  Earnings Per Share Attributable to Ruddick Corporation:                    
  Basic   $ 2.32   $ 1.79   $ 2.02  
  Diluted   $ 2.31   $ 1.78   $ 2.00  
                       
  Weighted Average Number of Shares of Common Stock Outstanding:                    
  Basic     48,215     47,964     47,824  
  Diluted     48,600     48,337     48,295  
                       
  See Notes to Consolidated Financial Statements        

28


STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
RUDDICK CORPORATION AND SUBSIDIARIES
(dollars in thousands, except share and per share amounts)

                                               
          

Common
Stock
Shares

(no par value)

    Common
Stock
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Total
Equity of
Ruddick
Corporation
    Non-
controlling
Interest
    Total
Equity
 
                                               
  Balance at September 30, 2007     48,127,252   $ 81,677   $ 693,992   $ (39,419 ) $ 736,250   $ 6,084   $ 742,334  
                                               
  Comprehensive Income:                                            
  Net earnings     -     -     96,752     -     96,752     484     97,236  
  Postemployment benefits adjustment, net of $95 for taxes     -     -     -     146     146     -     146  
  Pension adjustment, net of $6,988 for taxes     -     -     -     10,855     10,855     -     10,855  
  Foreign currency translation adjustment, net of $384 for taxes     -     -     -     763     763     316     1,079  
  Total Comprehensive Income                             108,516     800     109,316  
                                               
  Dividends ($0.48 a share)     -     -     (23,182 )   -     (23,182 )   -     (23,182 )
  Exercise of stock options, including tax benefits of $1,917     233,158     5,276     -     -     5,276     -     5,276  
  Share-based compensation     196,494     5,376     -     -     5,376     -     5,376  
  Directors stock plan     -     (12 )   -     -     (12 )   -     (12 )
  Shares purchased and retired     (249,600 )   (8,000 )   -     -     (8,000 )   -     (8,000 )
  Shares effectively purchased and retired for withholding taxes     (29,168 )   (1,065 )   -     -     (1,065 )   -     (1,065 )
  Acquisition from noncontrolling interest     -     -     -     -     -     (15 )   (15 )
  Distributions to noncontrolling interest     -     -     -